Matrix Corp Inc. is considering a 15 percent stock dividend. The capital accounts are as follows:
Common stock (4,000,000 shares) ........ . .. . .$ 40,000,000
Retained earnings ..................... . .. ............... . .60,000,000
Net worth ........................................................$100,000,000
The company's stock is selling for $40 per share. The company had total earnings of $12,000,000 with 4,000,000 shares outstanding and EPS were $3.00. The firm has a P/E ratio of 13.33.

a. What adjustments would have to be made to the equity accounts for a 15 percent stock dividend? Show the new capital accounts.
b. What adjustments would be made to EPS and the share price? (Assume the P/E ratio remains constant.)
c. How many shares would an investor have if he or she originally had 100?
d. What is the investor's total investment worth before and after the stock dividend if the P/E ratio remains constant? (There may be a slight difference due to rounding.)
e. Assume Mr. Neo, the president of Matrix Corp wishes to benefit the shareholder by keeping the cash dividend at a previous level of $1.05 in spite of the fact that the shareholders now have 15 percent more shares. Because the cash dividend is not reduced, the share price is assumed to remain at $40.
What is an investor's total investment worth after the stock dividend if he/she had 100 shares before the stock dividend? Under the scenario described in part e, is the investor better off?
f. As a final question, what is the dividend yield on the shares under the scenario described in part e?